The accidental accomplishment of Little Smart: understanding the emergence of a working-class ICT

The accidentalaccomplishment of LittleSmart: understanding the emergence of a working-class ICTJACK LINCHUAN QIUChinese University of Hong Kong, Hong Kong

AbstractThis article analyzes one of China’s most prominent working-class ICTs, Little Smart (xiaolingtong), an inexpensive wirelesstechnology which offers limited mobility service at the price ofa landline.The case analysis examines how the technology worksand diffuses, why it could emerge so rapidly amid structuraltransformations of China’s telecom reform and the subsequentco-evolution between market dynamics and state policy at thelocal, national and transnational levels. Drawing from interviewsand focus groups, the article discusses usage patterns and the keyproblems facing Little Smart. Besides the particularities of thecase, the emergence of Little Smart has broader implications forunderstanding the relationship between working-class ICTs andthe ‘information have-nots’ in general. It shows that working-class ICTs may materialize through accidental accomplishmentswith little prior planning by state or corporate players. However,without appropriate policy support, the emergence may not besustainable in the long run.

Key wordsLittle Smart • local implementation • mobility • telecom policy • transnational formation • working-class ICTs

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Copyright © 2007 SAGE PublicationsLos Angeles, London, New Delhi and SingaporeVol9(6):903–923 [DOI: 10.1177/1461444807082639]

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INTRODUCTIONCan wireless technology serve low-income communities? If we follow thereasoning of a deepening digital divide (National Telecommunications andInformation Administration [NTIA], 1999; van Dijk, 2005), the answer wouldbe pessimistic.The information ‘have-nots’ still lag behind in access tocomputer and the internet: how can they afford the latest mobile technology?However, this legitimate skepticism is contradicted by recent evidence fromthe developing world (Castells et al., 2006). In Africa, mobile phones arediffusing among microentrepreneurs (Donner, 2004). In Latin America,wireless local area networks (WLAN) are spreading in the countryside(Galperin, 2005; Galperin and Girard, 2005). In Asia, given the vibrancy ofthe region’s information technology (IT) industry supported by rapid marketexpansion and the ‘developmental state’ (Castells, 1998; Samuels, 1994), similarpatterns of wireless growth can be observed including, in particular, theemergence of Little Smart (Xiaolingtong) in China.

Little Smart is a low-end wireless technology which allows subscribers tohave mobile service at the price of a landline. In December 2006 it was usedby 91.1 million Chinese, which would be the world’s fourth largest wirelessuser population following the number of regular cellphone subscribers inChina, Japan and the USA, but more than the entire population of Germany(International Telecommunications Union, 2004).1

Conceptually, Little Smart is but one example of a series of working-classICTs emerging in China, which also include other services such as ShortMessaging Service (SMS), pre-paid mobile phone cards and internet cafes(Cartier et al., 2005; Qiu, 2006, 2007; Qiu and Zhou, 2005).These are low-end technologies with low prices, whose service quality may not beguaranteed. However, they have been growing phenomenally, constituting ‘thekey development’ in China’s new urban mobility patterns (Cartier et al.,2005: 14).Together, they serve the ‘information have-less’, ‘an informational –and therefore social, economic and political – category in the evolvingnetwork society, which sensitizes us to a new set of phenomena, problems andpolicy options’ (Cartier et al., 2005: 10).The ‘have-less’ are people with lowersocio-economic status, such as the unemployed, retirees, students andmigrants, who have begun to adopt information and communicationtechnologies (ICTs) on a massive scale.

A close look at Little Smart provides a good opportunity to explore thegeneral issues and questions regarding working-class ICTs and the well-beingof the information have-less.Although each working-class ICT is distinctand China is but one of many Asian countries, an in-depth examination ofLittle Smart is a necessary first step toward grounded theorization. For onlythrough the peculiarities of particular information services can we piecetogether the larger picture of working-class ICTs with insights about thetechnosocial reality that go beyond a single unitary modernity.

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Several research questions are posed with regard to the case of Little Smartto further our understanding of working-class ICTs empirically andconceptually:

How did Little Smart emerge so rapidly?What are the formation processes of this low-cost wireless technology at the

transnational, national and local levels?How did major commercial stakeholders – China Telecom, China Netcom

and UTStarcom – interact with national regulators and local state authorities inthese processes?

How do Little Smart subscribers perceive and evaluate the service? How arethey using it, and for what purposes?

Are they involved in the technology formation processes, if at all?What are the problems in the development of Little Smart? Why?

Due to a general lack of scholarly research on Little Smart, this articledraws on three types of data to answer these questions. First, Chinese-language materials from primary sources were collected and analysed,including news articles, official documents, IT industry reports, companyprofiles and a book-length collection of journalistic reports on Little Smart(Lin, 2005). Second, from 2002 to 2005 a series of face-to-face and telephoneinterviews were conducted with Little Smart subscribers as well as mid-levelexecutives involved in the research and development (R&D) and marketingof the technology.2 Third, in 2004 and 2005, two focus groups were heldamong Little Smart users in Zhaoqing and Shanghai. Zhaoqing is a small cityin South China, where the first commercial Little Smart service was launchedin 1998. Shanghai, on the other hand, was the last big city to have LittleSmart in 2004.3

THE SERVICE AND ITS DIFFUSION‘Little Smart’ is only one of many names for this wireless service, which isdelivered mostly via conventional landline telephone systems using acombination of specially designed base stations, controllers and managementsoftware as the last-mile solution to transmit voice and data to and frominexpensive wireless handsets.The officially designated name by China’sMinistry of Information Industry is ‘wireless city phone’ (wuxian shihua) inorder to categorize the service as part of the landline market in regulatoryterms.The most popular term, ‘Little Smart’ was originally the maincharacter’s name of a popular science fiction series by China’s mostaccomplished sci-fi writer Ye Yonglie (Lin, 2005: 45).The fictional name firstbecame a brand of UTStarcom, which brought the technology from Japan toChina. It was then adopted by the landline operators, China Telecom andChina Netcom.

Because the service began as a localized operation in late 1990s, it wasnamed differently by the local branches of China Telecom such as City Phone

Qiu: The accidental accomplishment of Little Smart

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Connection (Shihuatong) in Shenzhen and Duanzhou Connection(Duanzhoutong) in Zhaoqing, a city whose ancient name was Duanzhou.Meanwhile, there are an array of informal derogatory terms created bysubscribers to refer to Little Smart due to its low service quality, at leastduring the initial years.These include nicknames such as ‘Hello-Hello Call’(Weiweiko – because users are always saying ‘Hello, hello?’), ‘ToiletConnection’ (Shikengtong – to indicate the very low standard of service) and,in the city of Zhaoqing, ‘Duanzhou Disconnected’ (Duanzhousai).Althoughmost of the disparaging names are no longer in use due to the improvementof services, Little Smart’s multiple names, together with those assigned byregulators and telecom operators, reflect the complexity of technosocial issuesinvolved in the formation of this working-class ICT.

In technical terms, Little Smart is known as the Personal Access System (PAS)developed by UTStarcom on the basis of Japan’s Personal Handy-phone System(PHS) (Liu, 2004). It is a variant of Wireless Local Loop (WLL) technology,which includes the Digital Enhanced Cordless Telephony (DECT) system inEurope and its modified version, corDECT, in India as well as the CordlessTelephone second generation (CT-2) in Korea. But like the PHS in Japan, allthese low-end wireless technologies have been unable to achieve a similargrowth result as Little Smart in China (Castells et al., 2005; Yuan et al., 2006).

Little Smart is a limited mobility service. Its subscribers cannot roambeyond city limits because most handsets do not have a SIM card and thespatial range of coverage for each Little Smart base station is limited tohundreds of metres in radius, as opposed to ordinary cellular base stationswhich can cover areas kilometers or tens of kilometers away (Tan et al.,2005).The Little Smart signal is also less reliable and less clear, especially inmoving vehicles, compared with the Global System for MobileCommunications (GSM) and Code Division Multiple Access (CDMA) system.As a result, a widely observed usage pattern is that people carry two handsets:a Little Smart phone for not-so-important calls and a regular mobile phonefor important ones (for example, with one’s supervisors or clients).Meanwhile, Little Smart’s services tend to be limited: subscribers in mostcities could not send or receive SMS on their phones until 2004.Althoughadvertisements claim that Little Smart allows for low-cost international calls,one focus group participant in Shanghai complained that he was never able touse this function. Finally, because Little Smart handset makers try to lowerproduction costs, some basic functions of mobile handsets, such as the silentand vibration modes, are not provided in certain low-end models, thusmaking the user experience significantly inferior.4

Despite these drawbacks, the diffusion of Little Smart has beenexponential, increasing from 0.6 million in 1999 to 91.1 million in 2006(Figure 1).The average annual growth rate is significantly higher than regularmobile phone services (Figure 2).While it took seven years (1993–2000) for


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GSM subscription to increase from 1 million to 50 million in China, it onlytook Little Smart five years (1999–2004).Although since then the growth ratefor Little Smart dipped to 6.8 percent in 2006, as opposed to 17.3 percent forregular mobile phone, this wireless working-class ICT has already registeredmost impressive expansion in the first half decade of the new century.

Price is a key factor that drives growth. Because the service belongs tolandline business in regulatory terms, Little Smart subscribers only need topay when they call or send messages to others, whereas two-way charging isapplied for regular mobile services.Thus, the operational cost is halved. Insome cities, Little Smart users can pay a monthly flat rate of about $8 forunlimited airtime while GSM or CDMA users need to pay more than $12for 200 to 270 minutes airtime per month (Liu, 2004;Tan et al., 2005).TheLittle Smart handset is also much cheaper.As opposed to ordinary mobilehandsets costing from $100 to about $850, the price range of Little Smartphones ranges from under $50 to about $170.All the participants and focusgroup participants who began to use the service from 2002 onwards paidunder $100 for the handset. During promotional periods, several of them paidunder $30 to get the phone, while some others got handsets for a nominal feeof $0.12, or even totally free after signing a one-year contract and pre-paidingamounts of airtime expense for the coming year (about $60 in Shanghai and$36 in Zhaoqing). Little Smart users in Wuhan (central China), Shanghai andHangzhou (east China) also reported that they used pre-paid internet


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• Figure 1 Year–end total for Little Smart subscribers in China, 1999–2006 (million)Source: Data compilation from the Ministry of Information Industry (2004).

• Figure 2 Annual subscriber growth rates of Little Smart and regular mobile services (GSMand CDMA) in China, 1991–2006Source: Data compilation from the Ministry of Information Industry (2004).

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protocol (IP) services in addition to Little Smart to bring the cost of domesticlong-distance calls down to less than one cent, which is even less expensivethan local calls through a landline.

How could Little Smart have such a price advantage? Besides one-waycharging, PAS technology contains a few features to reduce infrastructure costas it was designed initially to cover small areas such as a building or residentialcomplex. First, it uses switches for the landline network and ‘requires nomodification to the central switching office, nor does it require investing inmobile switching hardware’ (Frost and Sullivan, 2003: 7). Second, it is can bescaled to fit areas of different user density, which varies greatly in Chinesecities.5 Third, it is relatively easy to set up. Landline operators only need toadd the base stations, some controllers and management software to theirexisting networks (Tan et al., 2005). It only takes three to four months todeploy Little Smart in a large city of 10 to 12 million potential users (Frostand Sullivan, 2003).

From the perspective of subscribers, although low cost remains the mainreason for adoption, participants in the focus groups in Shanghai andZhaoqing reported that another of their considerations was the health riskcaused by mobile phone radio wave emission.They believed that Little Smarthas much lower emissions than GSM and CDMA, which resulted partly fromcommercial promotion launched by service providers.The belief is reinforcedby the fact that the battery of Little Smart phones usually lasts longer, whichis a major advantage for users.A focus group participant in Shanghai, forexample, revealed that she only needed to charge her Little Smart handsetonce or twice every week, whereas regular mobile phones often need to becharged every day.These handsets, made in China in most cases, usually havea sleek look hardly distinguishable from ordinary mobile handsets.They alsotend to be lighter in weight.

Most importantly, the reliability and service quality of Little Smart systemshave improved significantly in recent years, especially in smaller cities. InZhaoqing, local China Telecom executives boasted that their Little Smartworks well in moving vehicles. One participant in the eastern city of Ningbois a widowed pensioner living by himself.Without a landline at home, LittleSmart was his only telephone. He chose to do so because the service wasreliable enough for him to conduct all his life activities through Little Smart,including arranging gatherings with families and friends and using it as hislifeline. However, not all cities have such a high level of service reliability,especially in major metropolitan centres such as Beijing and Shanghai, whichare late adopters of this low-end technology.

Finally, working-class consumers like Little Smart because ‘limited mobility’is a feature that reflects their daily life patterns.According to a survey byChina Post, 80 percent of the Chinese population spends 80 percent of theirtime within their respective city limits (China Telecom, nd). Shopkeepers in a


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local store, university students, pensioners, factory workers – many of thesepeople need to move around within the city but not to far flung places, atleast not frequently.As a result, in the initial stage of Little Smart deploymentthere were many instances where supply could not meet demand (Lin, 2005).Hence in most cities, subscription was limited to those who were registeredas local long-term residents, including micro-entrepreneurs (many of whomwere unemployed), students and retirees.These groups of information have-less remain the bulk of the market today. Meanwhile, the restriction onresidential status has been relaxed in recent years to appeal to a wider scopeof users, especially migrant workers.

CO-EVOLUTION OF MARKET AND POLICYA few key transformations have been underway in China’s telecom industry,setting the stage for the emergence of Little Smart.The first and mostprofound transformation is the overall modernization of the nationaleconomy, which has led to growing geographical and social mobility amongall classes, including the information have-less.A new set of market dynamicsemerged given the country’s continuous economic boom, on the one hand,and tremendous informational demands of the have-less, on the other (Cartier et al., 2005). Being uprooted from rural villages and state-ownedfactories, these people need to adapt to rapid social change.They are in searchof employment and education opportunities, social support and networkingresources to meet daily informational needs in housing, transportation andhealth care, which collectively create the new ICT market. It is within thisstructure of social stratification and the growing consumption capacity of thehave-less that Little Smart has become a popular technology.

Meanwhile, the country’s telecom market has been reformed from a singlestate monopoly to limited competition among four players including twolandline operators (China Telecom and China Netcom) and two mobileoperators (China Mobile and China Unicom), all of which remain state-owned but are now listed on stock markets.The real change here, when itcomes to providing connectivity to low-income communities, is notderegulation or liberalization, but the receding universal service commitmentand the reshaping of the telecom industry based on the logic of profitmaximization (Zhao and Schiller, 2002). In this process there is a partialopening up which allows for more competition within the domestic marketand more international participation including not only global telecom giants,but also emerging transnational players such as UTStarcom.

Much has been written on the reform of China’s telecom policy andtelecom market since the early 1990s (e.g. Guan, 2003; Lee, 1997; Muellerand Tan, 1997; Xu and Pitt, 2002). It is only necessary to recount the mostessential developments to show the shifting emphasis from universal service toaverage revenue per user (ARPU).This is a decade-long transformation to


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which the case of Little Smart belongs. In 1993 China Telecom, the only statemonopoly since the funding of the People’s Republic, began to be separatedfrom the Ministry of Post and Telecommunications.The Ministry of Post andTelecommunications was merged with the Ministry of Electronic Industry toform the Ministry of Information Industry in 1997. In 1998, China Telecomwas stripped of its mobile communication division, which became ChinaMobile, by far the largest wireless provider in the country.This was followedby the transference of half of China Telecom’s assets into the ownership ofChina Netcom in 2002, thus creating two similarly sized landline companies.

While the reshuffling proceeded, landline business came under tremendouspressure to increase profit, measured by ARPU, because both China Telecomand China Netcom began to be listed on stock markets including the New York Stock Exchange.The landline market was growing slowly withvery little, if any,ARPU increase.Yet sales for mobile phones and servicesgrew in leaps and bounds, with total subscriptions increasing from 43 millionin 1999 to 207 million in 2002 and the emergence of a series of value-addedservices such as SMS, ringtone downloads and General Packet Radio Service(GPRS), all helping to boost ARPU in the wireless sector (Xu, 2004). Sharpcontrast between the lucrative wireless market and unimpressive growth inthe landline sector created the major incentive for China Telecom and ChinaNetcom to offer limited mobility services.

However, the emergence of Little Smart resulted as much from the policyenvironment as the market situation, including both formal policymaking at thenational level and more practical and sometimes informal processes of policyimplementation at the local level ( Jiang, 2003; Liu, 2004). On this dimension itis essential to acknowledge that multiple policy rationales have been interwovento produce the complex and uneven development of Little Smart, and thatthese rationales do not have to be consistent with each other for they emergedfrom particular policy contexts, local or national. Indeed, the most critical factorin this process is the capacity for landline service providers to operate atmultiple scales, taking advantage of long-existing centre–periphery tensions inthe political system and the ability to scale the technology.

Figure 3 summarizes the trajectory of policy change with regard to LittleSmart at the national and local levels. Underpinning this series of events arethree crucial processes, the first being the lingering of China’s socialistcommitment to universal service, at least in the initial years of 1996–9.During this period, China Telecom began to experiment with this low-costsolution in order to increase telephone penetration in mountainous areas(Liu, 2004).At the time, there was little pressure to pursue higher ARPU;neither was there much recognition for the significance of working-classICTs.The main reason was because China Telecom attempted to use thewireless ‘last-mile’ solution to reduce infrastructure and operational costs sothat telephone penetration could grow faster in mountainous regions.


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This happened to meet the needs of some local governments becausetelephone growth is among the major criteria for evaluating local stateperformance. Hence, in cities where the relationship was particularly strongbetween local officials and the long-time state monopoly, China Telecom, thetwo sides would want to work together to foster Little Smart regardless ofdiscouraging or prohibitive national policy.

First, it is important to note that Yuhang and Zhaoqing, where Little Smartwas first launched, are not just any small cities.They are located not far fromthe central metropolises of Shanghai and Guangzhou in the country’s twowealthiest regions, the Yangtze River Delta and the Pearl River Delta,


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1996 China Telecom began to consider using a limited mobility service as the last-ditch solution to provide connectivity in mountainous areas.

December 1997 The first Little Smart trial site went into service in Yuhang, ZhejiangProvince.

December 1998 The first commercial Little Smart service was launched in Zhaoqing, Guangdong Province, marking its formal start in small cities.

1999 Little Smart entered two bigger cities, Kunming and Xi’an, both being provincial capitals.

October 1999 The Ministry of Information Industry issued an emergent order forbidding thedevelopment of new Little Smart projects in all provinces and cities.

May 2000 The Ministry of Information Industry asked all existing Little Smart projects to be suspended for evaluation.

June 2000 The Ministry of Information Industry issued the Announcement for theStandardization of Construction and Management Processes for PHS Wireless City Phone, specifying that Little Smart is a ‘low-speed wireless access service within small areas’.

November 2000 The Ministry of Information Industry ordered China Telecom to raise the monthly fee and airtime price for Little Smart.

February 2001 The Ministry of Information Industry issued a new order specifying the price scheme for Little Smart, while commanding Little Smart ‘not to be launchedin big cities in the short term’.

May 2002 China Telecom was split into two. China Netcom received half of China Telecom’s assets, including those for Little Smart operations.

March 2003 Little Smart was launched in Beijing.

May 2004 Little Smart was launched in Shanghai.

April 2003 Little Smart was launched in Guangzhou.

• Figure 3 The co-evolution of market and policy concerning Little Smart

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respectively. Such a location ensures relatively easy access and control byChina Telecom in the processes of constructing, maintaining and modifyingthe technology.The local governments here also control more resourcescompared with most other small cities, while enjoying relatively more latitudein policy implementation. Moreover, because the two deltas sustain China’smost globalized regional economies (Cartier, 2001), the market demand isalso stronger than elsewhere.

Second, however, Little Smart encountered strong resistance at the nationallevel, as testified by the Ministry of Information Industry’s repetitive request tosuspend the service or raise Little Smart prices during 1999 and 2000. BothChina Mobile and China Unicom, the two main mobile operators,campaigned vehemently against Little Smart for fear of competition.At thesame time, central decision-makers in Beijing hesitated to support Little Smartbecause it was believed to be ‘outdated technology’, and the spectrum used byLittle Smart reportedly overlapped with 3G communication (Bao, 2004; Jiang,2003;Yuan et al., 2006).What the national regulators did at this time was toissue the abovementioned ordinances to appease the mobile operators at leastfor a while, whereas the Ministry of Information Industry did not really haltall Little Smart projects, whose number continued to rise throughout China(Kuo, 2003). Such a loose way of implementation was taken as a de facto greenlight in local state practices.When the February 2001 Ministry of InformationIndustry ordinance came out, ruling that Little Smart could not enter bigcities, this was a sign of recognizing Little Smart in small cities.

Third, the process, which is a joint consequence of the first twodevelopments, has a spatial pattern of Little Smart diffusion known in China’stelecom industry as ‘countryside surrounding cities’ (nongcun baowei chengshi),a phrase borrowed from Chairman Mao’s military strategy.To be precise, LittleSmart began in small cities rather than the rural countryside. But this metaphorvividly reflects that the service was first available in the more ‘peripheral’ placesbefore entering urban centres such as Beijing and Shanghai. Moreover, thedevelopment, especially in its early periods in small cities such as Zhaoqing, wasmarginally legal, sometimes completely underground, subverting the officialregime from its fringes, in ways similar to Mao’s guerrilla war.6

‘Countryside surrounding cities’ was not a deliberate choice by ChinaTelecom or UTStarcom.Were they given the chance to choose, Little Smartprobably would have entered Beijing and Shanghai first. But it began with thedecision of the Ministry of Post and Telecommunications to import PAS in1996 under the promise that it would help to enhance teledensity in remoteareas (Liu, 2004). Hence, it began in relatively peripheral places, but not too farfrom the big cities. Meanwhile, there was considerably less resistance in smallcities, where China Mobile and China Unicom had barely entered, not tomention existing working relationships with the local state. National decision-makers were also more likely to tolerate the situation as temporary experiments


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in third-tier cities, where teledensity was low anyway.Thus Zhaoqing andYuhang became the first small cities for such ‘localized’ experiments.

In 1999, Kunming and Xi’an were the first two provincial capitals to adoptLittle Smart, both of which are located in inland western China ( Jiang, 2003).At this time, according to Duncan Clark, the process of legalizing Little Smarthad gone ‘from a policy of “grow quietly, but grow” to one of almost noregulation at all’ and ‘the ministry line now is,“We will neither support norhinder”’ (Kuo, 2003). In May 2004, following Beijing and Guangzhou,Shanghai finally began to provide Little Smart service. Hence the triumph ofthe ‘countryside surrounding cities’ strategy – unplanned, accidental and adhoc as it was – within the context of multi-scale co-evolution between policyprocesses and market dynamics.

THE TRANSNATIONAL OPERATIONS OF UTSTARCOMIn addition to its national and local dimensions, the rise of Little Smartinvolves major transnational operations as represented by UTStarcom,a company founded by returning overseas Chinese students in the USA,which played a central role in the formation of this working-class ICT.There are certainly other transnational dynamics, such as the listing of ChinaTelecom on the New York Stock Exchange or Ministry of InformationIndustry’s changing policy priorities, which were shaped partially by thetransnational discourse emphasizing competition in telecommunications.However, UTStarcom is remarkably different from China Telecom and theMinistry of Information Industry as a transnational player in and of itself, asshown by its history, management team and corporate positioning.

As the leading equipment provider, UTStarcom represents a third force that iscrucial to the co-evolution of policy and market other than telecom operatorsand state policymakers.With the rapid diffusion of Little Smart, a number ofmanufacturers such as ZTE, Huawei and 25 mobile phone firms have all enteredthis market, producing a range of products, including more than one hundredmodels of Little Smart handsets (Liu, 2004).There is an entire production chainfor the Little Smart business, which carries considerable political clout thatinfluences policymaking and implementation. Meanwhile, with themultiplication of equipment providers, the market share of UTStarcom hasdeclined to 65–70 percent, although it continues to play a dominant role.

In retrospect, the development of UTStarcom looked like a textbookexample for successful telecom start-ups with its annual revenue growingfrom about $10 million in 1995 to $2929 million in 2005 (Figure 4).Although the company invests in other businesses such as broadband internetaccess and has ambitions in such markets as India, Japan,Taiwan and the USA,its development trajectory matches closely the expansion of Little Smart inmainland China, with a most impressive growth between 2000 and 2003 anda slow-down of growth rate since 2004.


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How did UTStarcom grab the opportunity offered by Little Smart andbecome the main equipment provider? What is unique about this company?The answer lies in UTStarcom’s transnational operation, especially inconnection with Japan and the USA. Returning overseas Chinese students, asthe spearhead of transnational ‘brain circulation’ (Saxenian, 2005), have beenvery active in China’s telecom industry. UTStarcom stands out from othercompanies founded by returning students because, while most companies ofthis kind only have certain kind of connections to the USA, UTStarcomenjoys support from players in Japan and the USA, especially Masayoshi Son’sSoftbank in the case of the former.

UTStarcom has been a transnational enterprise since its inception.Although most of its revenues come from mainland China, its globalheadquarters are located in Alameda, CA.The company has eight R&Dcentres around the world, including three in the USA (New Jersey, Californiaand Chicago), four in China (Beijing, Hangzhou, Hefei and Shenzhen) andone in India. It has 30 branch offices not only in China and the USA but alsoin Australia, Germany, India, Israel, Japan and Vietnam. In April 2003,UTStarcom had close to 4200 employees, including about 700 in the USAand 3400 in China (see www.utstar.com).

The senior management team of UTStarcom consists of four coremembers – Hung Lu,Ying Wu, Bill Huang and Johnny Chou – all of whomwere former overseas Chinese students in the US.The remaining six membersof the management team are of American and European decent, includingmostly managers from American high-tech companies such as Lucent, 3M,Cisco and a former official from the US Commerce Department during thefirst Bush Administration.

Within this team, the key character is Hung Lu, the chairman and CEO ofUTStarcom. Born in Taiwan, Lu moved to Japan at age six and went to theUniversity of California-Berkeley, where he also gained entrepreneurialexperience. He founded Unitech in 1991 and merged it with Ying Wu’sStarcom to form UTStarcom in 1995. Lu has strong Japanese connections


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• Figure 4 Annual net sales revenue of UTStarcom ($ million)[Source: NASDAQ.]

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because he is a close business partner of Masayoshi Son, Japan’s leading ITinvestor, who regards Lu as his ‘blood brother’ since the two became friends at Berkeley (Global Entrepreneur, 2004). Son’s Softbank provided thefirst major venture capital of $30 million for UTStarcom in 1995, althoughthe annual sales revenue of the company was only $10 million.Without Lu’sconnection with Son, it would have been difficult for UTStarcom to raisesuch an amount of venture capital from any investor.

The Japan connection proved vital when UTStarcom began to importPHS equipment and handsets from Japan while making modifications on thetechnology to create its PAS system. Notably, the company did not have itsown model of Little Smart handset until late 2001, and it is only since thenthat UTStarcom had invested more heavily in adapting the technology to theneeds of the local markets, for example, by making more powerful basestations.7 Given the unstable policy environment at the time, the reliance onJapan for technology transfer was crucial.

UTStarcom also draws heavily from its US operation given the company’shistory, research and development centres and branch offices in America,although there are two particular aspects that need more emphasis. First is thelisting on Nasdaq.When UTStarcom completed its IPO on Nasdaq on 3 March 2000, its stock price soared 278 percent on the first day.Thecontinual progression of UTStarcom’s performance on Nasdaq was parallel tothe growth of Little Smart in China, where subscriptions increased by 362 percent during 2000 and 2001.Thus strong signals were sent to thecompany’s management team that it should capitalize on the Little Smartbusiness and invest more in the research and development of PAS. Second,when UTStarcom expanded at a later stage into other markets such as Taiwanand Vietnam, it always used the corporate identity as an American companyin order to gain more trust from international business partners.

It was the combination of these various transnational factors – in terms oftechnology transfer, venture capital, stock market investment and corporateidentity – which made UTStarcom a central player in the Little Smartphenomenon.This means that UTStarcom’s leadership role in the limitedmobility market should not be taken for granted. It is rather a joint productof the particular China–USA and China–Japan connections overlapping inthe organizational structure of the company at the time.

A PREMATURE DECLINE?The success of Little Smart, as remarkable as it was, needs to be understoodwith caution.The essence of the above analysis shows that the rise of thisworking-class ICT owes a host of institutional and historical factors operatingon transnational, national and local levels, whose unplanned overlapping,interaction and co-evolution helped to create a conducive situation whichhappened to meet the demands of the information have-less.The pending


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question is, how long can this accidental achievement last? To what extent isthe success of Little Smart a ‘shooting star (liuxing)’ ( Jiang, 2003: 1)? These aresalient concerns, since the landline operators and Little Smart equipmentproviders have realized, painfully, that this low-end market segment, despite itsgrowing size, has been suffering from ‘drastic decline in ARPU’ since 2004(IT Management World, 2004: 17).A national taskforce was established to ‘save’Little Smart on 13 December 2004 (IT Management World, 2004), reflectinga sense of crisis that sits at odds with the rapid speed of growth.

As mentioned earlier, similar limited mobility services such as Japan’s PHS,India’s corDECT and South Korea’s CT-2 never took off as Little Smart did,not because the technologies were not good enough or the other countriesdid not have enough telecom talent. Market demand, especially in India, hasbeen considerable. However, in Japan, for example, the PHS was regulated asa low-end mobile phone rather than part of the landline (Ma and Liu, 2004).The target consumer group is mostly schoolchildren, who tend to be morefashion sensitive than price sensitive and therefore unlikely to be attracted.The interaction of regulatory policy and market dynamic in this case failed toproduce conducive conditions.

The case of India illustrates another possible scenario, where the attractionof corDECT has been widely acknowledged as the ‘poor man’s mobilephone’, and whose total subscription increased from about 100,000 inSeptember 2001 to 7.55 million in March 2004 (Department ofTelecommunications, 2003–4; O’Neill, 2003).This impressive, but still smaller,scale of growth as compared with Little Smart was achieved under thecondition that India’s telecom authorities were much more supportive of thislimited mobility service than their Chinese counterparts.While the Ministryof Information Industry was trying to curb Little Smart growth, the IndianDepartment of Telecommunications issued its guidelines endorsing corDECTin 2001 with an explicit goal in enhancing universal service (McDowell andLee, 2003). However, the institutional framework for telecom policymaking isless centralized in India than it is in China. Subsequently, mobile operators inIndia were able to launch a legal challenge against the right of landlineoperators to provide a limited mobility service (O’Neill, 2003), somethingChina Mobile and China Unicom were unable to do. Given the loweraverage income in India, the market demand was also smaller. Meanwhile,under the less than favourable legal and market conditions, corDECT systemsin India usually cover small places, such as individual buildings orneighbourhoods, rather than entire cities (McDowell and Lee, 2003).

This article cannot provide more systematic international comparison due tothe limits of space (see more discussion on this in Castells et al., 2006). However,it is clear that, although Little Smart did well in comparison to similar servicesin Japan, South Korea and India, it also faces serious problems of its own.


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The slowdown of subscription growth (as shown in Figures 1 and 2) is but oneindicator of the beginning of the end.As with any technology, the diffusioncurve will plateau, but this is more than a situation of natural market saturation.It also results from co-evolving policy and market conditions since 2004.

An alarm signal is sent by UTStarcom’s drastically decreasing profitability(Figure 5).The ratio of the company’s net profit versus total sales revenue wasabout 11 percent in 2002 and 2003, but it was only 2.69 percent in 2004.As for 2005, the company failed to file its annual report on time, for which itreceived a warning from Nasdaq for delisting on 22 March 2006(PRNewswire, 2006a).When the annual report was finally released, thecompany had a net loss of $487.4 million in 2005. On 16 November 2006,UTStarcom received a second delisting alert for failing to file itsJuly–September quarterly report on time, which cast further doubt on thecompany’s performance (PRNewswire, 2006b).

The declining profitability of Little Smart results from the fact that, afterUTStarcom’s earlier success, both domestic and foreign players had enteredthe low-end wireless market, creating a new set of dynamics. Responding tothe competition posed by Little Smart, ordinary mobile phones became lessexpensive: for example, the Motorola C115 costing under $50 per handset inAugust 2005. Mobile service providers also lowered subscription fees, offeringless expensive packages, such as China Mobile’s M-zone. In other cases, somelocal Unicom branches already had begun to use a one-way charging scheme,which technically violated national regulation.The branches, again, tended tobe in smaller cities, thus strangely echoing the strategy of ‘countrysidesurrounding cities’.

Low price is again the key factor underlying the above competitive moveslaunched by the regular mobile phone sector against Little Smart. BecauseLittle Smart handsets and service packages are inexpensive, the cost is low forone to shift from Little Smart to a low-end GSM service.The same factor that


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contributed to the rapid diffusion of Little Smart a couple years ago maybecome a disadvantage for Little Smart manufacturers and operators with theheightening of market competition.

Another threat to the sustainability of Little Smart is China’s plan for third-generation (3G) mobile services.A commonly held view in the policy circle isthat Ministry of Information Industry will hand out 3G licences soon, and thatlandline operators will join mobile operators to hold two 3G licenses.As aresult, both landline operators, especially their branches in major metropolitanareas, are holding off investments in Little Smart in the anticipation of large-scale development in the 3G market. Meanwhile, there is also the argument thatLittle Smart is using part of the core frequencies designed for 3G deployment(Yuan et al., 2006).Although some UTStarcom executives maintained that theycould make Little Smart compatible with 3G, one can easily foresee thescenario that, when 3G licenses are issued, regardless of whether Little Smartloses its frequency or not, most of the investment by service and equipmentproviders will be shifted to this new area of growth.The stock market will thenrespond, exerting pressure on the remaining Little Smart business.

Finally, the informational needs of the have-less are recognized in a posthoc manner for commercial exploitation.They are not acknowledged inorder for telecom players to serve working-class consumers, enhancinguniversal service and promoting upward social mobility.Therefore, there islittle institutionalization, especially at the national level, for the mechanisms toprotect long-term sustainability of Little Smart – a common problem thatprobably faces all working-class ICTs.When such mechanisms exist, they tendto be in small cities where the market dominance of Little Smart has beenestablished already. For example, in Zhoushan, Zhejiang Province of eastChina, local residents can receive a reward of $122 for reporting a blind spotin the city where there is no Little Smart signal.8 But such a level ofcommitment to high-quality services is the exception rather than the rulewhen considering local landline operators throughout the nation. Moreover,such a local mechanism is not backed up by structural guarantees at thenational level, where the ultimate policymaking power resides.This meansthat even the more benevolent local service providers may abandon theircurrent strategies supporting this wireless working-class ICT at another time.

The migration of interests has already begun in the Little Smart industry,moving away from the original goal of capturing the low-end market to thetargeting of more affluent consumers. For example, UTStarcom has beenpushing a range of value-added products based on Little Smart, such as itsmobile internet solution called ‘MiMi C-Mode’ (Xu, 2004). SMS, ringtoneand handset wallpaper are among the other value-added services promoted byvarious local providers, following the same marketing routine used by GSMand CDMA operators which targets the middle class (Xu and Xu, 2004).


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In late 2004, some China Telecom and China Netcom employees evenproposed to give roaming capacity to all Little Smart phones by a mandatory‘upgrading’ of the systems on 17 May 2005,World Telecom Day (Shen, 2005).Fortunately, this proposal triggered immediate opposition among telecomanalysts and has been postponed indefinitely.

The problem here is not whether Little Smart can be used technically forall the non-voice activities, but whether users need these new services.Theunequivocal answer emerging from the interviews and focus groups in thisstudy is negative – most of the Little Smart subscribers do not need theseadd-ons, except for SMS. From their perspective, it is far more important toimprove voice communication signals rather than advanced data services thatfew will use.

CONCLUSIONThis article began with the question: can wireless technology serve low-income communities? It shall end, first and foremost, with a positive note.The strong message sent by Little Smart is that even though public andprivate stakeholders may not try deliberately to serve the information have-less, it is still possible for low-cost working-class ICT solutions to materialize.The logic of profit maximization, despite its obvious limitations, can create aserendipitous momentum for development-oriented wireless build-up atcertain historical conjunctures.

However, such a technosocial emergence is not guaranteed to succeed. It isconditioned by a few factors which may be generalized to other forms ofworking-class ICTs, pending further empirical investigation.These involve,first, the institutional settings of the telecom regulatory system, including bothformal rules and informal practices; second, market dynamics produced by theinformational needs and consumption patterns of the have-less populations,shaped by their everyday mobility patterns; and third, the co-evolution ofpolicy arrangements and market dynamics with the main commercial playersbeing situated in an increasingly transnational context.

The process and result of conditioning are historically specific. Hence the‘accidental accomplishment’ of Little Smart, which does not take us bysurprise because, arguably, historical and geographical coincidence has been akey element in the making of Silicon Valley by drawing together specific rawmaterial, capital and labour in a serendipitous fashion (Castells and Hall, 1994;Saxenian, 1994). In the case of Little Smart, it was first initiated as an attemptto promote universal service in the mid- to late 1990s and then transformedinto a major source of profit by landline operators and equipment providersduring 2000 to 2003.The same pursuit for higher ARPU, in a differentperiod since 2004, can also become a disincentive that hampers thedevelopment of this working-class ICT.


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Equally important is the spatial dimension of the technology, which showsthat, above all, wireless mobility can be localized; and that localized mobilitycan suit the daily life patterns of the information have-less very well.Moreover, the rise of Little Smart involves a complex scaling process from thetransnational to the national and then to the local level of operation.We haveonly begun to explore these scale relationships, although one suspects that themost crucial operational scale would be the local state, especially citygovernments, whose power in policy implementation and the social shapingof the technology was shown in the diffusion process of the ‘countrysidesurrounding cities’.To what extent this pattern applies to other working-classICTs is a question deserving future research.

The overlapping of historical and spatial conditioning explains why largecities such as Beijing and Shanghai lag behind smaller cities in terms of theirlocal Little Smart service quality.This creates a major drawback because thelarge metropolis is the centre of urban development, where have-lesspopulations are concentrated to serve an increasingly transnational economy.But in some of these places where market demand is the highest, the actualquality of Little Smart service is the lowest, creating one of the mosttroubling problems regarding this working-class ICT.

Sustainability remains the most formidable challenge. Based on thecombination of conducive factors at the transnational, national and local levels,the success story of Little Smart is essentially an accidental achievement basedon the serendipitous match between state and enterprise interests, on the onehand, and long-ignored market demands, on the other. Recalling that China’spager subscription, the world’s largest in the late 1990s, fell from 48.8 millionin 2000 to 0.97 million in July 2005 (Ministry of Information Industry, 2004,2005),9 who can promise that Little Smart will not become a disposedtechnology in a few years? This challenge over time is a key lesson which canbe drawn from this analysis of the Little Smart. In other words, in whatevercondition ICT services are technologically, the solutions have to be social,involving public and private stakeholders as well as the information have-lessthemselves.This is probably the most enduring issue emerging from this study,which shall inform future studies on working-class ICTs in Asia and beyond.

AcknowledgementsThis project would have been impossible without financial support from the AnnenbergResearch Network for International Communication (ARNIC) and the ChineseUniversity of Hong Kong Direct Grant #4450077.An earlier version of this article waspresented at the ARNIC Wireless Communication and Development Workshop,7–8 October 2005. I am grateful for feedback from workshop participants as well ascomments from Nicholas Jankowski, Eric Thompson and two anonymous reviewers. I amparticularly indebted to Manuel Castells, whose advice is essential to my pursuit of thisline of research. I also thank Qiu Linhai, Lu Hui and Lin Qingsong for their support indata collection.


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Notes1 It is important to note that the official number for regular mobile phone users in

China does not include Little Smart, which is counted in regulatory terms as part ofthe landline market.

2 Interviews with subscribers were conducted with people from 15 cities and nineprovinces spreading across China’s western region (Sichuan Province and ShaanxiProvince), northern region (Beijing and Tianjin), central region (Hubei Province),eastern region (Shanghai, Zhejiang Province and Anhui Province) and southern region(Guangdong Province and Hainan Province). Interviews with telecom executives wereconducted in Guangzhou (South China), Hangzhou and Shanghai (East China).

3 Participants of the Zhaoqing focus group included one local government employeeand five others from local business enterprises.The Shanghai focus group consisted offive university students and one high school teacher.Although there is a lack ofinformation about the general subscriber profile nationwide, it is confirmed throughthe interviews and observations here that local business people and university studentsare two of the main subscriber groups of Little Smart.

4 Interviews with users in Shanghai.5 Interview with UTStarcom executives in Hangzhou.6 Participants in the Zhaoqing focus group all recalled the period in 1999 and 2000

when they heard that the Little Smart service in their city would be stopped.Two ofthem reported that they delayed their plan to adopt the technology precisely becauseof this ‘rumour’.

7 Interview with UTStarcom manager, Hangzhou.8 Focus group discussion in Shanghai.9 See Cartier et al. (2005) for more discussions on the wax and wane of pagers in China.

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JACK LINCHUAN QIU is assistant professor at the School of Journalism and Communication,Chinese University of Hong Kong. He researches on ICTs and class, globalization and latecapitalism in the contexts of China and Asia.Address: School of Journalism and Communication, the Chinese University of Hong Kong,Shatin, N.T., Hong Kong. [email: [email protected]]


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The accidental accomplishment of Little Smart: understanding the emergence of a working-class ICT

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